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The problem with applying that part of game theory here is it makes several assumptions.
The biggest is that the bigger party are playing for maximisation, rather than just to "win". That is very much not the game with trump.
The second is the assumption that there is only 1 game in play at a time. America could cause devastating economic damage, if it went full tantrum. Europe has noticed how vulnerable they are to that sort of action. They need to patch the holes before playing hardball.
Under these assumptions, taking fairly meaningless hits to buy time makes sense. Pull the wolf's teeth, before challenging it to bite you.
No game theory account for such scenarios too. The ones not playing by the rules are normally psychopaths and the like, so game theory is about handling that type of scenario when the normal rules no longer apply. It's not just about simple greed, people brake the rules for various reasons. Psychopaths like Trump and the White House, simply feel more entitled, and they need to be shown very clearly that it will not be accepted.
We absolutely need to respond to Trump according to game theory, because you can't control him by throwing him a cookie from time to time, he will always come back for more until he is stopped. The exact same as with Putin, despite they are different psychologies.
Trump is a bully because he thinks he can get away with it. When he is shown he can't, he is most likely a coward if he think there are consequences. This is also how he gets the TACO nickname.